In today’s briefing:
- Mar24 Nikkei 225 Rebal – Socionext, Disco, Zozo IN; US$4bn One-Way; More Impactful Than It Looks
- Nikkei 225 Index Rebalance: DISCO, Socionext, ZOZO In; PacMetals, Sumitomo Osaka, Takara Holding Out
- May Lockup Release & April SSF Listing May Lead to Weird Trading Dynamics for Ecopro Materials
- Block Deal Sale of 2.2% of Kakao Pay by Alipay
- NIFTY100 Low Volatility 30 Index Rebalance Preview: Titan Could Replace IOCL
- Vinda (3331 HK): That’s A Wrap As Pre-Cons Done
- TOPIX Inclusions: Who Is Ready (Mar 2024)
- Alumina (AWC AU): Further Thoughts on Alcoa’s Proposal
- MVIS Australia A-REITs Index Rebalance Preview: One Deletion & Capping Changes
- Locals Driving Corporate Reforms and 10 Korean Companies Recently Announcing Share Cancellations
Mar24 Nikkei 225 Rebal – Socionext, Disco, Zozo IN; US$4bn One-Way; More Impactful Than It Looks
- The changes to the Nikkei 225 Average for the March 2024 Review were announced today after the close. A little earlier than I expected.
- Socionext, Disco, Zozo IN; Takara Hldgs, Sumi Osaka Cement, Pacific Metals OUT. Nitori PAF increase. US$4bn+ to trade one way on 29Mar close. One interesting surprise.
- Overall more impactful than it looks. And it changes the front-end arithmetic on Fast Retailing (9983 JP). There may be fun on the DELETEs.
Nikkei 225 Index Rebalance: DISCO, Socionext, ZOZO In; PacMetals, Sumitomo Osaka, Takara Holding Out
- DISCO (6146 JP), Socionext (6526 JP) and ZOZO (3092 JP) will replace Takara Holdings (2531 JP), Sumitomo Osaka Cement (5232 JP) and Pacific Metals (5541 JP) in the Nikkei 225.
- Nitori Holdings (9843 JP)‘s PAF will increase from 0.3 to 0.5, and surprisingly there is no PAF adjustment for ZOZO Inc (3092 JP).
- Passive trackers need to buy between 1-18 days of ADV on the adds while selling between 2.7-28 days of ADV on the deletes. There is a big funding trade too.
May Lockup Release & April SSF Listing May Lead to Weird Trading Dynamics for Ecopro Materials
- May 17th, all eyes on EcoPro Materials for a buzzed-about lockup release. BRV Capital holds 24.5% stake, 17M shares. Lockup ends May 16th; they’re free to sell off without constraints.
- Apparently, they’re eager to cash out, with a profit margin around 30 times and 7 years invested. Many at Yeouido bet they’ll sell out once the lockup’s over.
- We might start building a shorting position with futures targeting this lockup release from April 22nd. This could stir up some weird backwardation, which could give us another trading opportunity.
Block Deal Sale of 2.2% of Kakao Pay by Alipay
- After the market close on 5 March, it was reported that Alipay will sell a 2.2% stake (2.95 million shares) in Kakaopay (377300 KS) in a block deal sale.
- A key component of this block deal sale is that there will be a lock up period of 90 days post the sale date.
- We would avoid this block deal sale. There is a high probability of Kakao Pay’s share price falling below the block deal price of 38,380 won after 90 days.
NIFTY100 Low Volatility 30 Index Rebalance Preview: Titan Could Replace IOCL
- With the review period complete, Titan Co Ltd (TTAN IN) should replace Indian Oil Corp (IOCL IN) in the Nifty100 Low Volatility 30 Index at the close on 27 March.
- Constituent changes, volatility changes and capping changes will result in one-way turnover of 13.2% resulting in a one-way trade of INR 4.2bn.
- The flows on the stocks are not very large but there will be same side and offsetting flows from other index trackers at the same time.
Vinda (3331 HK): That’s A Wrap As Pre-Cons Done
- On the 15 December 2023, the Tanoto family emerged with a HK$23.50 pre-conditional Offer for Vinda (3331 HK). PRC regulatory approval to one side, this Offer was a done deal.
- Those regulatory approvals have now been satisfied. The Composite Doc will be dispatched on or before the 11th March, at which time the Offer will be open for acceptances.
- With a 50% minimum acceptance condition and irrevocables of 72.624% (plus Tanoto’s 7.69% direct stake), this should turn unconditional on or before the 20th March
TOPIX Inclusions: Who Is Ready (Mar 2024)
- Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
- There were no Section Transfers announced in January or February so currently there are no live TOPIX Inclusion events but there are some pre-event names to be monitored closely.
- The upcoming TOPIX flows in end-April 2024 will be more complicated than the other quarterly rebalances as there will be more flows due to the annual liquidity factor review.
Alumina (AWC AU): Further Thoughts on Alcoa’s Proposal
- I have received several questions from readers on Alcoa (AA US)’s non-binding proposal for Alumina Ltd (AWC AU) in the context of the current gross spread of 9.2%.
- The questions primarily concerned Citic Resources Holdings (1205 HK) voting intentions, the probability of a bump and the likelihood of Aloca shareholders supporting the transaction.
- CITIC Resources’ lack of public endorsement of the transaction is due to HKEx listing requirements and not an indication of a NO vote risk.
MVIS Australia A-REITs Index Rebalance Preview: One Deletion & Capping Changes
- With the review period for the March rebalance complete, Abacus Storage King (ASK AU) could be deleted from the index and there will be capping changes.
- The index changes will lead to a one-way turnover of 3.6% resulting in a one-way trade of A$21m. There are three stocks with over A$4m to trade.
- Goodman Group (GMG AU) is an inclusion to a global index in March and that buying will far outweigh the selling from the Vaneck Vectors Australian Property ETF (MVA AU).
Locals Driving Corporate Reforms and 10 Korean Companies Recently Announcing Share Cancellations
- In a recent discussion with a client, one of the questions that was raised was regarding the impact the local investors are having on the corporate governance reforms in Korea.
- The number of local investors in the Korean stock market has jumped in the past few years from 5.3 million in 2017 to 14.4 million in 2022.
- All in all, I think Korea is about 3-5 years behind Japan in various corporate governance reforms. So it has a lot of catching up to do.
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